Humberto Ruiz, executive director of Medellin Cocaine, explains: “Anthrax attacks and related hoaxes the United States has left many Americans unwilling to snort white powder up their noses. As a result, first-time use is down 68% from last year, and regular customers are reducing their usage by an average of 15%. Even with steep price cuts and volume discounts, we’ve had difficulty stimulating demand.”

In response to declining sales and rising levels of unsold inventory, Medellin Cocaine closed two of its seven coca-gathering farm operations in Colombia and laid off over 300 full-time employees as part of broad cost-cutting measures. While most of Medellin’s former corporate-level staff received two-month severance packages, seasonal coca leaf harvesters who earn an average of US$5.50 per day, are expected to be dismissed without any form of compensation.

“These are difficult times,” Ruiz acknowledges. “While the informal cocaine distribution network in the United States has helped us rapidly acquire market share with a minimum investment in logistical infrastructure, it makes things problematic for us to assure the safety-conscious consumer of our product’s quality or purity. Phone traffic to Medellin Cocaine’s 800-number Customer Service line quadrupled in the past two months from anthrax-related queries.”

When asked what Medellin Cocaine intends to do in response, Ruiz replied: “Currently, we are developing factory-sealed, “single-serving high” disposable servings of cocaine the size of fast-food ketchup packs, which we plan to introduced Q2 of 2002. We also intend to raise our expenditures on advertising and public relations by 20% to US$15 million as part of a focused campaign to regain market share lost from users who’ve switched to marijuana and alcohol.”

Medellin Group announced it expects to earn 11 to 13 pesos per share in the quarter ending January. According to Thomson Financial/First Call, security analysts’ average forecast was 22 pesos per share.

“While management’s resourceful and proactive actions in handling marketing, expenses and inventory issues are admirable,” remarks Goldman Sachs equity analyst Michael Wu, who raised his rating of Medellin Group to “long-term buy” from “accumulate,” “it remains to be seen if the announced increases in capital expenditures can be recouped in current market conditions.”